Industry & Economy
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Gems & Jewellery
No cause to waive excise duty on branded jewellery
G. Chandrashekar
Mumbai, July 6 If the Finance Minister did a good job in hiking Customs duty on gold imports, he deserves no kudos for withdrawing excise duty on branded jewellery.
Unlike the street-corner family jeweller, the branded players in the jewellery market are big boys.
Recording transactions
It was in the Union Budget of 2005 the then Finance Minister Mr P. Chidambaram imposed a 2 per cent excise duty on branded jewellery. Not surprisingly, there were loud protests from the industry; but the impost continued.
A 2 per cent excise duty is unlikely to hurt buyers of branded jewellery as these products already enjoy a high price premium in the marketplace and are favoured by the well-to-do class. Consumers who can afford to buy branded jewellery can surely afford a small extra hike in prices. In any case, the impost would be passed on by branded jewellery makers to the ultimate consumers.
Supporting the levy of excise duty on branded jewellery, Business Line (March 8, 2005) had argued that the fiscal impost would bring discipline to the trade. It is no secret that not all transactions in jewellery business are faithfully recorded. An excise duty regime will cast a duty on the jewellery maker to record all transactions and document everything from raw material purchases, inventory, processing, labour and energy costs to sales and income.
Such documentation will facilitate collection of all kinds of taxes including excise duty, income tax, local taxes and so on, while minimising the potential for suppression of transactions. Indeed, over time, a well enforced excise duty regime would remove distortions and create a level-playing field for all branded jewellery makers.
Relief Unwarranted
Mr Pranab Mukherjee seems to have missed the point in his anxiety to give some relief. It is unclear which section of the stakeholders he is trying to please. The relief is unwarranted. Branded jewellery sales in the country are booming, going by the enormous advertising budgets of jewellery makers in all media. It is a goose that lays a golden egg. Instead of caging and nurturing it for long-term benefit, it is a mystery why he let it off.
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